House sale - What will you do?

Andrew_Ryan_89

Hi all,

I know I have created a few threads on this so I apologise in advance if I am boring some people. The situation was, and still is, my mum is currently in the middle of getting her house repossessed by the bank. She had an interest only mortgage, term came to an end a few years ago and she does not have the money to pay off the remaining debt.

With the short lease and current condition (which is not good), the house is worth £330k-380k but is proving difficult to sell because of the 50c year lease. With the lease extended you are probably looking at a value of £430k and refurbished value of £500k plus. There is £35k left on the mortgage which needs to be paid off.

Between my mother (who does not earn much and is 60) and my brother, they managed to get a MIP but it's for the mortgage and the lease extension and the lender is insisting on the mortgage offer being completed simultaneously with the lease extension which is proving difficult as the freeholder is dragging his feet and ignoring all correspondence

The whole thing is causing my mum a whole lot of distress and I suggested that she cut her losses, sell her house for around £330k (an offer received from one of those "we buy any house" companies) and between my brother and her, buy somewhere a bit further out and cheaper.

If she was to to go through the whole lease extension and refurbishment, She would have to spend around £30k on the extension and £20k-£30 on refurbishment to get it up to the £500k value. Minus the other £35k for paying of the debt, she will be left with around £400k. Whereas, if she sold now for £330k without the lease extension or refurbishment, she will be left with around £300k

I am (somewhat) in a position where I could borrow the money against my own house (which has little equity in it and I moved in less than a year ago) so she can pay of the bank and do the lease extension. However, I am hesitant to do so as I don't want to be in a position where I am hounding my family for not keeping up with payments etc. Also, dealing with the freeholder and the court and legal cost involved will just add more cost.

So my question is, am I potentially missing out on an investment opportunity? If I do lend the money to get the whole thing sorted, my mum will reward be substantially. Or, should my mum just sell the property for £330k offered by the "we buy any house" company?

What do you think her best move is?

davidmcn

Countless previous threads concur that the "we buy any house" companies are only likely to mess you around and end up paying way less than the market value (a repossession would probably achieve a higher price!), so the last resort should really be putting it into auction.

G_M

am I potentially missing out on an investment opportunity?

Surely this is not the issue? What matters is what is the best solution for your mum, not what is the best way for you to benefit form this situation!!!

Where does mum want to live, given the choice? Further out with your brother? Or is this a desperate no-other-choice alternative? Or where she is, if a way can be found?

If the thought of legal wrangles with the freeholder and renovation over the future months (year?) seems like a nightmare prospect to her, then reduce the price but NOT to a we-buy-any-house rip-off merchant. Either use an EA but at a lower price, or go to auction. Then she can use the equity and move in with brother or whatever.

On the other hand if she'd really rather stay in the home she knows, then be a good son, lend her the money to get the mortgage lender off her back, and sort out the lease etc.

If this will stretch you, and mean "hounding my family for not keeping up with payments ", then
a)make very clear to mum AND you brother who should help, that you are doing this for mum's sake (not your invetsment opportunity) and that you really need them to help with your repayments.

Once the lease is extended, research the (few) building societies that consider lending to older borrowers - perhaps mum could then get a modest mortgage herself and ay you back, at least in part.

eddddy

Andrew_Ryan_89 wrote: »

... with the lease extension which is proving difficult as the freeholder is dragging his feet and ignoring all correspondence

So it sounds like you are negotiating an informal lease extension.

Have you told the freeholder how desperate you are? If you have, sadly, that may be why the freeholder is messing you about

The more desperate you become, the more you may be willing to pay for a lease extension.

Perhaps the better option is to go down the Statutory Lease Extension route. The freeholder cannot ignore that. But you need to be pretty sure that you can raise the finance before you start.

Lloyd90

How did your mum originally intend to pay off the house ?
What was her plan / circumstances of coming to the end of a mortgage knowing she wouldn't be able to pay ?

If disaster struck and she was unfortunate I might consider it but if she knew full well and just 'didn't care' I'd be very concerned about giving/lending someone so reckless such a large amount of money!

Marvel1

In regards to loaning the money, borrowing the money against the house, what does your wife think as its her at risk also?

marksoton

Andrew_Ryan_89 wrote: »

So my question is, am I potentially missing out on an investment opportunity?

You bloody what?

Pixie5740

Don't you have a 95% LTV mortgage, so how much do you think you can borrow against your house assuming your pregnant wife goes along with this plan.

I don't see this as an investment opportunity for you. I see it as you helping out your mum which you should only do if it won't be detrimental to your new family (wife and child).

What kind of £25k to £30k refurbishment is going to add £70k to the value of the property?

I think your mum could sell the house (open market not those "we buy any house" rip off merchants) with the lease extension as part of sale.

I know you do get houses that are leasehold in England. I'm surprised though that people would be willing to pay £500k for a leasehold house when surely there are freehold houses available in the area.

moneyistooshorttomention

Lloyd90 wrote: »

How did your mum originally intend to pay off the house ?
What was her plan / circumstances of coming to the end of a mortgage knowing she wouldn't be able to pay ?

If disaster struck and she was unfortunate I might consider it but if she knew full well and just 'didn't care' I'd be very concerned about giving/lending someone so reckless such a large amount of money!

Very true:T

Whatever else you do - do NOT involve your own finances with hers. If you do - then she would only drag you down with her.

I can follow the logic re extending the lease to make the house worth more. I do not follow the logic of spending any money on the house itself - bad idea.

In your position = the house needs to go to auction. Yep...I've also read those "horror stories" about what those "we buy any house" companies get up to.

With the amount of money tied up in this house - there is no doubt she will be able to have a good choice of other houses to buy. £300k or so will definitely easily cover a mortgage-free house in good condition. If she has to move to elsewhere to get it (eg because of being in a dear area) - well it was her decision to choose to go interest-free back along.

BTW - Yep your wife also has 50% of the say as to whether you do this or no. It's not very fair to even think of taking financial risks with your money on her behalf.

csgohan4

Your mother is not a child, she knew about this many years ago, if you involved yourself, it will only drag you down, help what you can but she has to take responsibility for her own actions, especially letting the lease run down.


If she had sold the house earlier or renewed the lease earlier, your mother would have been a in a better position

AdrianC

If the short lease is making £50-100k difference to a £430k long-lease value, then you may want to consider whether it's worth just cutting your losses now.

Putting the details into the statutory lease calculator gives a lease extension value around £70,000 - so, depending on the short-lease sale price, you may well be out of pocket in extending the lease before sale.
http://www.lease-advice.org/calculator/

It would not be easy to calculate the short-lease value of a property needing so much refurbishment - you're very likely to need to sell it at auction, at which the hammer price is anybody's guess. Her best bet is almost certain to be to proactively liaise with the lender as soon as possible, and dispose of it herself to minimise the costs of repossession and then disposal.

If it's got to the stage that a £35k 10% LTV interest-only mortgage is now several years past the redemption date, and we're at an advanced stage in repossession, then proactive liaison has fairly obviously been lacking until now...